Twitter: out of character

Group must show explosive growth to justify its valuation

Data storage company Telecity Group have received a take over offer from Equinix, the largest US based data centre company.

Telecity and Equinix: plugged in

Data centres have become key utilities for the world’s businesses

Shake Shack: diner dilemma

It’s difficult to justify high share price of expensive US burger joint

Greek banks: not in their hands

If Greece’s creditors do a deal with Athens, the woes of its lenders will be limited to a liquidity crisis

Avago microchip

Avago/Broadcom: celebrations too early

Debt casts shadow over tie-up of semiconductor groups

Michael Kors Fall/Winter 2015
©Catwalking

Michael Kors: lack of luxury

Shopping in Manhattan is no longer such a draw

Kaisa: fools rush in

Return of former majority shareholder does not help minorities

Proxy advisers: Dimonised

JPMorgan chief’s point about proxy advisory services is just plain wrong

China energy: blowing in the wind

Early leaders in wind and solar equipment faced overcapacity

Generali: generally getting there

Greco turns attention to operational fine-tuning, and payback for shareholders

  • Just Eat: a whole lotta kebabs

    Just-Eat offered to pay £445m (A$867m) for Australian take-away delivery company Menulog. That’s a whopping 371 times earnings (before interest, taxes, depreciation and amortisation). Using last year’s results as a starting point, what does Menulog need to deliver to make that price reasonable?

    Our initial calculations of what Menulog needs to deliver were challenged by some Lex readers… and while Lex is never wrong, we are willing to become more right, if given the opportunity. So the analysis below has been changed since it was initially published (the changes are detailed at the bottom for anyone interested).

  • Pretty little shells?

    So maybe things are starting to get a little overexcited in Hong Kong. We notice two recently listed micro cap companies that have had stratospheric rises.

    Firstly Yan Tat Group, a printed circuit board manufacturer with revenues of $86m. In 4 days the market capitalisation had gone from just over $300m to a high on Friday morning of $3.2bn. At that high, the share price was up over 3 times versus Thursday’s close. At pixel time, however, the share price was down over one third from Thursday’s close and falling. That is an intraday swing in market capitalisation of $2.5bn.

  • The math behind Heinz/Kraft

    Missing from the press release on the Kraft Heinz deal is just how much explicit value Kraft shareholders are getting. It’s an odd structure where Kraft gets 49 per cent of the new company PLUS a one-time dividend of $16.50.

    Kraft shares have traded up to more than $80.

  • Ocado, mashed into guacamole

    Lex has a tricky realtionship with go-go e-retail businesses. Their valuations – that is, the relationship of their stock prices to their profits – imply long-term growth rates inconsistent with the normal competitive pressures in retail. So mostly we make surly comments about them. There is, however, another side of the story. Online retail leadership does seem to persist. So in a recent note about Ocado, the UK grocer, we departed a little from our previous dour tone, and tried to articulate the bull case. Here is our summary:

    [sceptics about Ocado's valuation] have failed to accept the core principles of online retail investors. Namely that much more of the market will convert to online; that the leader online, because of economies of scale, will never be overtaken by the also-rans; that margins online will expand beyond those of the traditional competitors; and that the bricks-and-mortar leaders will never become digitally competent. Accept this catechism, and all else follows. It is easy to doubt the four together, but in Ocado’s case, no one of them is obviously wrong, either.

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